July CPI Report: Core Inflation Hits 3.1% YoY, Highest Since February

The July Consumer Price Index (CPI) report shows inflation rose 0.2% month over month, matching expectations, and 2.7% annually, slightly lower than expected. Core CPI, excluding food and energy prices, rose 0.3% from the prior month and 3.1% annually, higher than forecasts. The core reading was the highest increase since February.

The July Consumer Price Index (CPI) report, released on August 12, 2025, indicates that inflation rose 0.2% month-over-month, aligning with economist forecasts [1]. On a year-over-year basis, inflation increased to 2.7%, slightly below the anticipated 2.8% [1]. Core CPI, which excludes food and energy prices, surged 0.3% from the previous month and 3.1% annually, surpassing expectations of 0.3% and 3.0% respectively [1].

The report highlights tariffs as a significant driver of inflation, with economists attributing the rise in consumer prices to tariff-induced price hikes [1]. While services inflation has been slowing, the uptick in core CPI suggests that inflation may become more persistent [1].

Goldman Sachs economists predict that new auto prices will continue to decline, but used car prices will rise, contributing to the core CPI increase [1]. Additionally, areas particularly affected by tariffs, such as household furnishings and recreational goods, are expected to add to the core CPI rise [1]. Airline fares are also forecasted to rise by 2% for the month [1].

The July CPI report underscores the ongoing impact of tariffs on consumer prices. JPMorgan's Priya Misra estimates that the full weight of tariffs has yet to be felt, and she expects CPI increases to hit 3.0%-3.5% by December on a year-over-year basis [1]. Goldman Sachs economists predict a more moderate increase of 2.9% year-over-year in December CPI [1].

The Federal Reserve's response to the inflation data remains a focus for investors. Futures markets indicate a 95% chance of a quarter-point interest rate cut in September, with a 62% probability of a further cut in October [3]. Misra agrees with the consensus estimate, noting that as long as inflation remains limited to goods, the Fed can look through it and cut rates in September [1].

In contrast, Egypt's annual urban consumer price inflation dropped to 13.9% in July, down from 14.9% in June, according to data from CAPMAS [4]. This decrease is attributed to an $8 billion financial support package agreed with the International Monetary Fund in March 2024 [4].

References:
[1] https://www.morningstar.com/economy/july-cpi-report-forecasts-show-continued-tariff-driven-inflation
[2] https://www.cnbc.com/2025/08/12/cpi-inflation-report-july-2025.html
[3] https://www.fxstreet.com/analysis/us-cpi-yoy-us-consumer-prices-edged-up-in-july-amid-rising-data-quality-concerns-202508120709
[4] https://www.zawya.com/en/economy/north-africa/egypts-annual-urban-consumer-price-inflation-down-to-139-in-july-capmas-says-bmpgfkam